Fewer problem banks, lending up as industry recovery continues

By Wendell Cochran

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The nation’s banks continued to recover in the second quarter, as the volume of troubled assets on their books dropped to the lowest level in three years, according to data from the Federal Deposit Insurance Corp.

Banks earned $34.5 billion, below the $35.3 billion reported for the first quarter of this year but above the $28.8 billion recorded in the second quarter of 2011.

Research by the Investigative Reporting Workshop shows marked improvement over the last year in the volume of troubled assets (nonperforming loans and repossessed property) weighing down bank balance sheets. At the end of June, banks reported $223.7 billion in troubled assets, down from $280.7 a year earlier. Troubled assets peaked at $382.1 billion in March 2010.

At the end of June, 260 banks had more troubled assets than capital, according to the Workshop analysis. That number peaked at 411 in March 2010. The FDIC reported that it has trimmed its problem list from 772 to 732 in the second quarter, but the agency does not identify the banks it considers “problem” banks.

Lending continued to grow in the second quarter, though the amount of loans outstanding is still well below the levels at the end of 2007. The 7,255 banks reported holding $7.36 trillion in loans, up from $7.12 trillion a year earlier. On Dec. 31, 2007, banks had $7.8 trillion in loans.

In particular, banks are increasing their loans to businesses. For the quarter, business lending expanded by 3.6 percent. Consumer lending also showed strong gains, with credit card balances up by 2.3 percent and mortgages up by nine-tenths of a percent.

The number of banks also continued to decline, dropping to 7,255 at the end of June. No new banks have been formed in a year, the FDIC said.

Credit unions, which hold a fraction of the nation’s financial assets, also have been posting stronger results, according to reports filed with the National Credit Union Administration.

In the second quarter the 7,104 credit unions made a combined profit of $2.14 billion, up from $2.07 billion in the first three months of the year.

Lending at credit unions stood at $581.7 billion on June 30. A year earlier credit union loans were $564 billion. Credit unions saw their mortgage loans expand by 1.7 percent and their automobile lending grow by 2.8 percent.

Visit IRW’s Banktracker to see the results for any bank or credit union in the nation.